Report: Agencies Know They're Behind On Digital

Agencies are struggling to meet the demands of digital-centric
opportunities, according to more than 2,000 agency employees queried in The State of Advertising Talent report from management consultant smith & beta. The majority of respondents (62%) claim
their clients are asking for more advanced digital work, yet 43% of agencies feel they aren't prepared. Only 7% say they are exceeding client expectations when it comes to digital work. For those in
client roles, this percentage drops to 5.6%.

The longer employees have been in the advertising industry, the lower their perception of their agency‘s ability to exceed client
expectations. Those with the most experience lack confidence in their agency’s digital capabilities, and the majority of employees rate their digital capabilities in between failing and
exceeding.

Many claim that clients simply aren’t buying digital ideas from their agencies. Employees often lose confidence to sell ideas after repeated rejections, so many become
apathetic. In addition, agencies that continue to pitch digital ideas sometimes succeed at “selling it in” but then fail to execute on the ideas presented. This lack of confidence in
execution has eroded employee risk-taking for fear of underperforming, says the report. Nearly two in three (62%) say their shops "talk more than they make."

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"Advertisers need to pay
attention to capabilities of agencies, understand who they are hiring and how their own team collaborates with agencies," says Allison Kent-Smith, founder, smith & beta. "Brands are just as in
need of skill evolution and they have a history of investing in employee capabilities. If I were a CMO, I'd read the report carefully and put programs in place that ensure that their marketing teams
keep pace and evolve skills accordingly."

Employees struggle to keep up with the ever-evolving skills needed in the digital space. More than half rank themselves as "novice or below" in
mobile advertising strategy, prototyping, and measurement. One in three say they are lacking in cross-platform story-telling abilities and 47% are unsure about their capabilities when it comes to the
user experience.

"The most surprising finding is that agencies are so behind in mobile," says Kent-Smith. "With a phone in almost every pocket, why have our skill sets not evolved to
meet the opportunities that mobile presents? I'm also surprised that agencies continue to be so far behind in prototyping, as showing ideas where they will eventually live is often necessary to
selling."

Many employees say that they don’t have permission to learn. Lack of prioritization and leadership support drives employees to look for roles outside of their companies
in order to continue to learn, grow and explore. Talent flight is undeniable, says the report.

This is because agency leaders have not evolved their ways of working to allow for
integrated learning, experimentation and risk-taking, says Kent-Smith. "We're still operating in 'ways of working' that resemble the 1960s. We all know that we need to evolve, yet we continue to
acquire and hire talent to solve the problem and that simply has not worked."

The report outlines key takeaways for advertisers. Agencies must shift their investment from emphasis on
acquisition of talent to development of talent. And conference and single workshop educational investments should move to annual integrated learning programs to allow employees to continually evolve
their skills.

Also, leaders should establish distributed innovation programs beyond the 'classroom' that provide time and space for learning. And agencies need to re-evaluate payment
opportunities as the billable hour model is restricting growth, collaboration, and evolution in the industry.

Last but not least, agencies should offer education as a service to their clients
in order to learn digital capabilities together.

The report is based on three years of data. A survey was distributed to leading advertising companies across North America, APAC,
LATAM, and EMEA since 2013. Survey participants included employees from small and large agencies who answered skill and organizational readiness questions via a quantitative survey and one-on-one,
group employee and leadership interviews.